Total and CNOOC Agree to Build Crude Oil Refinery in Uganda

Having finally settled their differences Total and CNOOC have agreed deal with the government of Uganda to build a small oil refinery in the East African country.

Explorers initially found oil in 2006 but development of the fields were met with delays due to arguments over the taxes and the lack of local refineries. At the beginning of last year Total and CNOOC each bought a third of British explorer Tullow Oil's exploration assets for a total $2.9 billion, and they have now just agreed to construct a refinery with an initial capacity of 30,000 barrels a day.

President Yoweri Museveni made a public statement to announce that the two parties had “agreed to start with the refinery size of 30,000 barrels per day,” although he had been pushing for a 200,00 barrel a day facility.

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Museveni now wants Total and CNOOC to sign a memorandum of understanding in order to add more security to the deal. “We have wasted too much time. We are now with the issue of oil for seven years. We need to make our final decisions,” he said.

The Ugandan government hoped to refine all the crude locally in order to increase the revenues, help fund new infrastructure projects, and provide cheaper energy to Africa’s third largest economy. However Total and CNOOC have decided that there is insufficient demand to warrant a large refinery, and instead will opt for building a pipeline to Kenya’s coastline from where the crude can be exported.

Uganda has an estimated 3.5 billion barrels of crude oil.

By. Joao Peixe of Oilprice.com